Oil expected to drop to $ 64 by year end: MUFG


Brent is expected to fall $ 75 per barrel (/ bbl) in the second quarter (Q2) of the year to end Q3 and Q4 2021 at $ 73 / bbl and $ 64 / bbl, respectively, and $ 58 / bbl in average in 2022, says a report.

Oil prices remained firm this week amid continued easing in international travel as well as another sharp drop in U.S. crude inventories, which offset uncertainty surrounding the potential contagion effects of the Evergrande fallout. in China, said the Mitsubishi UFJ Financial Group, a Japanese banking holding and financial services company, in its latest “Oil Market Weekly”.

“Balancing the headwinds of cyclical demand with the structural tailwinds of supply leads us to remain neutral to bearish on oil prices in the last quarter of 2021 – despite the upward impulses resulting from the fallout from the crisis. from gas to oil markets, ”the MUFG said in the report.

“We remain tactically bullish for the week ahead, with positive catalysts moving at a steady pace due to the ripple effect of the gas supply crisis leading to an even tighter physical oil market, Continued drawdowns in inventories and mobility eases continuing at a steady pace The explosion of Brent crude time spreads over the last few trading days suggests the path to $ 80 / bbl is looming.

Global gas prices have skyrocketed as a result of a myriad of events that all added up: LNG supply disruptions; sharp drops in European gas production; below average renewable energy production; and lower than expected Russian exports to Western Europe.

As Europe heads into winter with much lower gas inventory levels, markets are increasingly obsessed with both the scale of gas / LNG imports to the continent and the amount of oil that can be substituted. gas in the coming months.

From an oil markets perspective, we estimate the conceivable gas-to-oil conversion capacity at 1.9 million barrels per day (b / d) in Europe, Asia and the Middle East. If only a fraction of that potential change were to occur this winter – alongside an increasing demand for heating oil – it could lead to an increase in global oil demand of 1 to 2 million barrels per day for 3 to 6 months, notes The report. – TradeArabia News Service

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